WEIRTON STEEL CORP, 10-Q, 1998-11-16

WEIRTON STEEL CORP
10-Q, 1998-11-16
STEEL WORKS, BLAST FURNACES & ROLLING MILLS (COKE OVENS)

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998.

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from --------------------- to ---------------------

Commission file number 1-10244

WEIRTON STEEL CORPORATION
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 06-1075442
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification #)
</TABLE>

400 THREE SPRINGS DRIVE, WEIRTON, WEST VIRGINIA 26062-4989
(Address of principal executive offices) (Zip Code)

(304) 797-2000
(Registrant's telephone number, including area code:)

Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [ ]

The number of shares of Common Stock ($.01 par value) of the Registrant
outstanding as of October 30, 1998 was 41,274,041.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WEIRTON STEEL CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES.................................... $314,704 $359,452 $992,442 $1,072,677
OPERATING COSTS:
Cost of sales........................... 282,072 317,388 872,881 971,148
Selling, general and administrative
expenses.............................. 8,996 9,087 28,047 27,061
Depreciation............................ 15,188 15,525 49,226 47,877
Restructuring charge.................... -- -- -- 17,000
Profit sharing provision (benefit)...... (1,358) -- 2,355 --
-------- -------- -------- ----------
Total operating costs................. 304,898 342,000 952,509 1,063,086
-------- -------- -------- ----------
INCOME FROM OPERATIONS....................... 9,806 17,452 39,933 9,591
Equity income (loss) from unconsolidated
subsidiaries.......................... (73) -- 14 --
Interest expense........................ (10,937) (12,478) (33,349) (36,416)
Other income............................ 1,259 1,077 3,875 2,880
ESOP contribution....................... (653) (653) (1,958) (1,958)
-------- -------- -------- ----------
INCOME (LOSS) BEFORE INCOME TAXES............ (598) 5,398 8,515 (25,903)
Income tax provision (benefit).......... (111) 1,053 1,575 (5,051)
-------- -------- -------- ----------
NET INCOME (LOSS)............................ $ (487) $ 4,345 $ 6,940 $ (20,852)
======== ======== ======== ==========
PER SHARE DATA:
Weighted average number of common shares (in
thousands):
Basic................................... 41,454 42,618 42,151 42,615
Diluted................................. 41,454 44,390 43,901 42,615
NET INCOME (LOSS) PER SHARE:
Basic................................... $ (0.01) $ 0.10 $ 0.16 $ (0.49)
Diluted................................. $ (0.01) $ 0.10 $ 0.16 $ (0.49)
</TABLE>

The accompanying notes are an integral part of these financial statements.

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<PAGE> 3

WEIRTON STEEL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNT)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
(UNAUDITED) (AUDITED)
----------- ---------
<S> <C> <C>
Assets:
Cash and equivalents, includes restricted cash of
$1,635 and $2,046..................................... $ 75,759 $ 124,690
Receivables, less allowances of $7,691 and $9,853...... 134,886 140,843
Inventories............................................ 237,745 260,933
Deferred income taxes.................................. 34,437 34,437
Other current assets................................... 6,798 4,803
---------- ----------
Total current assets.............................. 489,625 565,706
Property, plant and equipment, net..................... 574,827 591,389
Deferred income taxes.................................. 113,262 111,148
Other assets and deferred charges...................... 19,954 14,297
---------- ----------
Total assets...................................... $1,197,668 $1,282,540
========== ==========
Liabilities:
Current portion of long term debt obligations.......... $ - $ 42,163
Payables............................................... 109,798 132,666
Employment costs....................................... 66,272 61,800
Taxes other than income taxes.......................... 15,458 22,417
Other current liabilities.............................. 13,959 12,571
---------- ----------
Total current liabilities......................... 205,487 271,617
Long term debt obligations............................. 389,253 388,997
Long term pension obligations.......................... 73,582 97,542
Postretirement benefits other than pensions............ 341,669 338,474
Other long term liabilities............................ 31,444 32,804
---------- ----------
Total liabilities................................. 1,041,435 1,129,434
---------- ----------
Redeemable stock............................................ 22,499 20,579
Stockholders' equity:
Common stock, $0.01 par value; 50,000,000 authorized;
43,136,294 and 42,846,184 shares issued............... 431 428
Additional paid-in capital............................. 457,073 456,379
Retained earnings (deficit)............................ (316,074) (323,014)
Other stockholders' equity............................. (7,696) (1,266)
---------- ----------
Total stockholders' equity........................ 133,734 132,527
---------- ----------
Total liabilities, redeemable stock and
stockholders' equity........................... $1,197,668 $1,282,540
========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

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WEIRTON STEEL CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................... $ 6,940 $(20,852)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation......................................... 49,226 47,877
Amortization of deferred financing costs............. 1,568 1,380
Restructuring Charge................................. -- 17,000
ESOP Contribution.................................... 1,958 1,958
Deferred income taxes................................ (2,114) (5,051)
Cash provided (used) by working capital items:
Receivables....................................... 5,957 3,043
Inventories....................................... 23,188 12,760
Other current assets.............................. (1,995) (2,279)
Payables.......................................... (22,868) (15,165)
Other current liabilities......................... (1,099) 4,195
Long term pension obligation......................... (23,960) (9,965)
Other................................................ 2,421 8,556
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 39,222 43,457

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in unconsolidated subsidiaries.............. (7,561) --
Capital spending....................................... (32,664) (51,151)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES....................... (40,225) (51,151)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt obligations.......................... (42,163) --
Purchase of treasury stock............................. (5,765) --
-------- --------
NET CASH USED BY FINANCING ACTIVITIES....................... (47,928) --
-------- --------
NET CHANGE IN CASH AND EQUIVALENTS.......................... (48,931) (7,694)

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD................. 124,690 112,092
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD....................... $ 75,759 $104,398
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net of capitalized interest............. $ 35,056 $ 34,228
Income taxes paid, net................................. 4,382 --
</TABLE>

The accompanying notes are an integral part of these financial statements.

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NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, OR IN MILLIONS OF DOLLARS WHERE INDICATED)

NOTE 1
BASIS OF PRESENTATION

The Consolidated Condensed Financial Statements presented herein are
unaudited. Weirton Steel Corporation and/or Weirton Steel Corporation together
with its consolidated subsidiaries are hereafter referred to as the "Company."
Certain information and footnote disclosures normally prepared in accordance
with generally accepted accounting principles have been either condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Although the Company believes that all adjustments necessary for a
fair presentation have been made, interim periods are not necessarily indicative
of the financial results of operations for a full year. As such, these financial
statements should be read in conjunction with the audited financial statements
and notes thereto included or incorporated by reference in the Company's 1997
Annual Report on Form 10-K.

The consolidated financial statements include the accounts of the Company
and its wholly and majority owned subsidiaries. All significant intercompany
transactions are eliminated in consolidation. Investments in other than wholly
or majority owned subsidiaries are accounted for under the equity method of
accounting.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Certain prior period amounts have been reclassified, where necessary, to
conform to the presentation in the current period.

NOTE 2

INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Raw materials........................... $ 92,963 $ 97,974
Work-in-process......................... 50,662 69,418
Finished goods.......................... 94,120 93,541
-------- --------
$237,745 $260,933
======== ========
</TABLE>

NOTE 3

EARNINGS PER SHARE

For the three months ending September 30, 1998, basic and diluted earnings
per share were the same. Securities totaling 1,732,367 and the impact of stock
options were excluded from the diluted earnings per share

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<PAGE> 6

calculation due to their antidilutive effect. The following is reconciliation
between basic and diluted earnings per share for the nine months ended September
30, 1998;

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
---------------------------------
PER SHARE
INCOME SHARES AMOUNT
------ ------ ------
<S> <C> <C> <C>
Basic earnings per share:
Net Income............................................. $6,940 42,151,390 $0.16
Effect of dilutive securities
Series A Preferred..................................... -- 1,725,663 --
Stock options.......................................... -- 24,439 --
------ ---------- -----
Diluted earnings per share:
Net income............................................. $6,940 43,901,492 $0.16
====== ========== =====
</TABLE>

For the three months ended September 30, 1997, a reconciliation of basic
and diluted earnings per share follows;

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997
---------------------------------
PER SHARE
INCOME SHARES AMOUNT
------ ------ ------
<S> <C> <C> <C>
Basic earnings per share:
Net Income............................................. $4,345 42,618,154 $0.10
Effect of dilutive securities
Series A Preferred..................................... -- 1,747,725 --
Stock options.......................................... -- 23,731 --
------ ---------- -----
Diluted earnings per share:
Net income............................................. $4,345 44,389,610 $0.10
====== ========== =====
</TABLE>

For the nine months ending September 30, 1997, basic and diluted earnings
per share were the same. Securities totaling 1,781,482 and the impact of stock
options were excluded from the earnings per share calculation due to their
antidilutive effect.

NOTE 4

COMPREHENSIVE INCOME

In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130, which establishes standards for reporting
and displaying comprehensive income and its components, requires the reporting
of all changes in equity of an enterprise that result from transactions and
other economic events other than transactions with owners. Comprehensive income
is the total of net income and all other nonowner changes in equity. SFAS No.
130 is effective for fiscal years beginning after December 15, 1997.
Comprehensive income calculated under SFAS No. 130 is the same as the net income
reported by the Company for the three months and the nine months ended September
30, 1998 and 1997.

NOTE 5

ENVIRONMENTAL COMPLIANCE

The Company, as well as its domestic competitors, is subject to stringent
federal, state and local environmental laws and regulations concerning, among
other things, waste water discharge, air emissions and waste disposal.

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<PAGE> 7

issues pertaining to waste water discharge, air emissions and waste handling
operations of the Company. In September 1996, the Company and DEP and EPA
reached a settlement regarding these water, air and waste-related issues. Under
the settlement, the Company paid a penalty of $3.2 million in 1997.

The settlement also requires the Company to conduct certain remedial
activity at one of its waste disposal sites. Additionally, the Company is
required to undertake certain capital projects to assure compliance with air,
water and waste-related regulations. These capital expenditures include upgrades
and modifications to air emissions control equipment, wastewater treatment
systems and waste handling facilities. Under the settlement, the Company
committed to environmental related capital projects totaling approximately $19.0
million. Through September 30, 1998, the Company has expended approximately
$14.1 million related to these capital commitments.

The Company is currently conducting compliance tests of certain air and
effluent emissions pursuant to the settlement. The Company is currently
substantially in compliance with the standards set forth in settlement and
management believes that the Company will remain in compliance throughout the
testing period and thereafter.

In connection with the negotiations, the EPA issued a corrective action
order, effective October 18, 1996, requiring the Company to conduct
investigative activities to determine the nature and extent of hazardous
materials which may be located on the Company's property and, if necessary, to
evaluate and propose corrective measures needed to abate any unacceptable risks.

The Company has accrued approximately $8.0 million related to environmental
related liabilities, including costs associated with the corrective action
order. Because the Company does not currently know the nature or the extent of
hazardous material which may be located on the property, it is not currently
possible to estimate the ultimate cost to comply with the corrective action
order or conduct remedial activity that may be required.

The Company believes that National Steel Corporation ("NSC") is obligated
to reimburse the Company for a portion of any costs that may be incurred by the
Company to comply with the corrective action order and to undertake any required
remedial action. Pursuant to the agreement whereby the Company purchased the
assets of the Weirton Steel Division of NSC in 1984, NSC retained liability for
cleanup costs related to solid or hazardous waste facilities, areas or equipment
as long as they were not used by the Company in its operations subsequent to the
acquisition.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This discussion and analysis of the Company's financial condition and
results of operations should be read together with the unaudited consolidated
condensed financial statements and notes thereto. The unaudited consolidated
condensed financial statements of Weirton Steel Corporation include the accounts
of its consolidated subsidiaries. Weirton Steel Corporation and/or Weirton Steel
Corporation together with its subsidiaries are hereafter referred to as the
"Company."

Domestic steel producers face significant competition from foreign
producers. Foreign competition is intense and has adversely affected product
prices in the United States and tonnage sold by domestic producers. The
intensity of foreign competition is substantially affected by the relative
strength of foreign economies and fluctuation in the value of the United States
dollar against other foreign currency. In 1998, there has been a significant
rise in imports, especially from Japan, Russia and Brazil. On September 30,
1998, the Company joined other steel companies in filing flat rolled trade cases
against dumped and subsidized imports from Japan, Russia and Brazil. In August
1998, these countries shipped nearly 783,000 tons of hot rolled steel to the
United States, accounting for 55% of all hot rolled imports. Compared to August
1997, hot rolled shipments from these countries increased nearly 200%. Unfairly
traded imports will have an even greater impact on the fourth quarter.

THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1997

In the third quarter of 1998, the Company recognized a net loss of $0.5
million or $0.01 per diluted share compared to net income of $4.3 million or
$0.10 per diluted share for the same period in 1997. The third quarter
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results reflected a weakening domestic steel market created by record levels of
imported flat rolled steel products. The results for the third quarter of 1998
included a benefit for profit sharing of $1.4 million. The profit sharing
benefit was recorded to reverse the previously accrued profit sharing provisions
due to the third quarter loss and anticipated losses for the remainder of 1998.

Net sales in the third quarter of 1998 were $314.7 million, a decrease of
$44.8 million or 12% from the third quarter of 1997. Total shipments in the
third quarter of 1998 were 646 thousand tons compared to third quarter 1997
shipments of 705 thousand tons.

Sheet product net sales for the third quarter of 1998 were $193.7 million,
a decrease of $28.2 million from the third quarter of 1997. Shipments of sheet
products in the third quarter of 1998 were 449 thousand tons compared to 485
thousand tons in the second quarter of 1997. The decrease in sheet product sales
resulted from lower selling prices and shipment levels.

Tin mill product net sales for the third quarter of 1998 were $121.0
million, a decrease of $16.6 million from the third quarter of 1997. Shipments
of tin mill products in the third quarter of 1998 were 197 thousand tons
compared to 219 thousand tons in the third quarter of 1997. The decrease in tin
mill product net sales resulted from lower selling prices and shipment levels.

Cost of sales for the third quarter of 1998 were $282.1 million, or $437
per ton, compared to $317.4 million, or $450 per ton, for the third quarter of
1997. Cost of sales in the third quarter of 1998 reflected a lower cost product
mix when compared to the same period in 1997.

During the third quarter of 1998, the Company recognized interest expense
of $10.9 million compared to $12.5 million for the same period in 1997. The
decrease was due to a lower level of outstanding debt obligations during the
period.

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1997

In the first nine months of 1998, the Company recognized net income of $6.9
million or $0.16 per diluted share, compared to a net loss of $20.9 million or
$0.49 per common share for the same period in 1997. The results for the first
nine months of 1998 included a provision for profit sharing of $2.4 million. The
results in the first nine months of 1997 included a $17.0 million restructuring
charge. Excluding the effects of the restructuring charge and the resulting
impact on income taxes, the net loss for the first nine months of 1997 would
have been $7.2 million or $0.17 per diluted share.

Net sales in the nine months of 1998 were $992.4 million, a decrease of
$80.2 million or 7% from the first nine months of 1997. Total shipments in the
first nine months of 1998 were 2,027 thousand tons compared to 1997 shipments of
2,128 thousand tons in the same period.

Sheet product sales for the first nine months of 1998 decreased $48.2
million to $616.0 million. Shipments of sheet product in the nine months of 1998
were 1,424 thousand tons compared to 1,475 thousand tons in the first nine
months of 1997. The decrease in sheet product sales is attributable to a
decrease in selling prices and the decrease in shipments.

Tin mill product sales for the first nine months of 1998 decreased $32.0
million to $376.4 million. Shipments of tin mill products in the first nine
months of 1998 were 603 thousand tons compared to 653 thousand tons in the first
half of 1997. The decrease in tin mill product sales results primarily from
lower tin mill product shipments.

Cost of sales for the first nine months of 1998 were $872.9 million, or
$431 per ton, compared to $971.1 million, or $456 per ton, for the first half of
1997. Cost of sales in the first nine months of 1998 benefited from the
Company's continuing cost reduction programs and lower employee benefit
expenses. Additionally, cost of sales in the first nine months of 1998 reflects
the benefit of the rebuild of the No. 1 Blast Furnace that was completed in the
first quarter of 1997.

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<PAGE> 9

During the first nine months of 1997, the Company finalized its labor
agreements with members of the Independent Steelworkers' Union. The new
contracts, among other things, provided for a retirement window for its
retirement eligible employees. As a result of the retirement window the Company
recorded a restructuring charge of $17.0 million which included early retirement
benefits of $10.4 million and other separation benefits of $6.6 million.

Interest expense for the first nine months of 1998, was $33.3 million, a
decrease of $3.1 million compared to the same period in 1997. The decrease in
interest expense is due to the lower levels of outstanding debt obligations
during the first nine months of 1998 compared to 1997.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 1998, the Company had cash and equivalents of $75.8
million compared to $124.7 million as of December 31, 1997. The Company
generated $39.2 million in cash from operating activities in the first nine
months of 1998 compared to $43.5 million in the first nine months of 1997. The
Company repaid $42.2 million of 11 1/2% Senior Notes which became due on March
1, 1998.

The Company has no required minimum pension contribution for 1998 due to a
funding credit of approximately $79.0 million as of the beginning of the year.
However, in the first nine months of 1998, the Company contributed $43.0 million
to its pension fund.

As of September 30, 1998, and December 31, 1997, after reductions for
amounts in place under its letter of credit subfacility, Weirton Receivables
Inc. (a wholly owned subsidiary of the Company) had a base amount of
participation interests available for cash sales under a receivables
participation agreement of approximately $52.5 and $57.9 million, respectively.
Letters of credit outstanding under the receivables participation agreement were
$12.8 million as of September 30, 1998.

Based upon available cash on hand, the amount of cash expected to be
generated from operating activities and amounts available under the receivables
participation agreement, the Company expects to have sufficient cash to meet its
short term needs, including the completion of its capital spending plans and the
redemption of $85 million in senior notes that mature on October 15, 1999.

During April 1998, the Company announced that it had been authorized by the
board of directors to repurchase up to 10%, or approximately 4.2 million shares
of its outstanding common stock. Through October 31, 1998, the Company had
repurchased approximately 1,652,500 shares of its outstanding common stock at
prices ranging from $1.75 to $4.50 per share.

The Company's net deferred tax assets are $147.7 million as of September
30, 1998, which consist of the carrying value of net operating loss
carryforwards and other tax credits and net deductible temporary differences
available to reduce the Company's cash requirements for the payment of future
federal income tax.

INVESTMENT IN FACILITIES AND SUBSIDIARIES

Expenditures for property, plant and equipment for the first nine months of
1998 totaled $32.7 million. The Company's planned capital additions for 1998 are
approximately $50.0 million. Included in the Company's planned capital
expenditures for 1998 is approximately $11.5 million related to environmental
compliance projects and approximately $8.0 million for information systems.

During the first nine months of 1998, the Company invested approximately
$6.7 million in GALVSTAR L.P., an unconsolidated subsidiary, formed with
Koninklijke Hoogovens for the purpose of constructing and operating a 300,000
ton hot-dipped galvanizing line. During the first nine months of 1998, the
Company also invested $0.9 million in W&A Manufacturing, an unconsolidated
subsidiary, formed with ATAS International for the purpose of manufacturing a
steel roofing product.

In the third quarter of 1998, the Company entered into a partnership
venture called MetalSite L.P. This venture will offer a secure Web-based
marketplace for the online purchase of metal products from various U.S.
suppliers and will provide users with the latest industry news and information.
The third quarter results of MetalSite L.P. were consolidated into the results
of the Company, but were not material thereto.
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<PAGE> 10

YEAR 2000

A task force continues to analyze potential areas of risk associated with
the Year 2000 and to make any required modifications as they relate to business
computer systems, technical infrastructure, end-user computing, manufacturing
and environmental operations. An inventory of computer systems and
date-sensitive automated devices for the aforementioned areas was completed in
June 1998. An impact assessment has been completed and replacement and
remediation activities are in process. The Company anticipates that the
technical software infrastructure for mainframe computers will be essentially
Year 2000 ready in December 1998. Vendor software and other computing platforms
continue to be analyzed for Year 2000 readiness. The Company is also monitoring
the efforts of entities with which it does business and is participating with
steel industry and other trade associations to collect information on the Year
2000 readiness of such entities. The Company has contacted its third party
suppliers, such as utility providers telecommunication companies, outside
processors and other critical suppliers, and is analyzing their Year 2000
readiness based on responses to the Company's inquiries. Additionally, as part
of its continuing efforts, the Company will develop contingency plans by the
second quarter of 1999 that include an analysis of strategies and available
resources to restore operations, a recovery program that identifies
participants, processes, and any significant equipment needed and alternative
sourcing strategies.

The Company's objective is to achieve Year 2000 readiness for its present
systems by the end of the first quarter of 1999. Thereafter, the task force will
continue to test Year 2000 readiness, including continued monitoring of progress
by entities with which the Company does business.

As part of its capital plan, the Company has replaced or is in the process
of replacing certain of its business systems dealing with human resources and
financial reporting. The planned replacement of these systems was accelerated
for the purpose of achieving Year 2000 readiness. The Company expects to have
these systems implemented by the second quarter of 1999. Through September 1998,
the Company had spent $9.3 million on these projects. The Company plans to spend
an additional $7.8 million to complete these projects.

Through September 30, 1998, in addition to the replacement of human
resources and financial systems, the Company has spent approximately $3.1
million in remediation costs to achieve Year 2000 readiness. Management
anticipates that the Company will spend between $6.0 million and $8.0 million,
including approximately $1.0 million in capital expenditures, to achieve Year
2000 readiness. As the work of the task force progresses, the Company will
continually revise its estimates of costs required to achieve Year 2000
readiness.

While management believes the Company will successfully achieve its Year
2000 readiness goals, failure to achieve these goals and/or the inability of our
third party suppliers to continue providing their products and services could
pose significant operational, environmental, quality and/or financial risk to
the Company. Consequently, the operating results of the Company could be
adversely affected. The cost of Year 2000 readiness and the dates by which the
Company believes it will achieve readiness are based on management's best
estimates and assumptions of future events. There can be no guarantee that these
estimates will be achieved, and actual results could differ materially from
those anticipated.

ENVIRONMENTAL COMPLIANCE

In March 1996, the West Virginia Department of Environmental Protection
("DEP") and the United States Environmental Protection Agency ("EPA") advised
the Company that it had identified a number of enforcement issues pertaining to
waste water discharge, air emissions and waste handling operations of the
Company. In September 1996, the Company and DEP and EPA reached a settlement
regarding these water, air and waste-related issues. Under the settlement, the
Company paid a penalty of $3.2 million in 1997.

the Company committed to environmental related capital projects totaling
approximately $19.0 million. Through June 1998, the Company has expended
approximately $14.1 million related to these capital commitments.

The Company accrued approximately $8.0 million related to environmental
related liabilities, including costs associated with the corrective action
order. Because the Company does not currently know the nature or the extent of
hazardous material which may be located on the property, it is not currently
possible to estimate the ultimate cost to comply with the corrective action
order or conduct remedial activity that may be required.

OUTLOOK

Demand for flat rolled steel products in the Company's markets remains
steady. However, increased unfairly traded imports have weakened the Company's
order entry and shipping rates and have caused a reduction in selling prices in
recent months. In response to these conditions, management has curtailed its
planned fourth quarter steel production and has reduced its workforce through
layoffs. Consequently, the Company expects a loss in the fourth quarter.

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. In addition to historical information,
this report contains forward-looking statements that are subject to risks and
uncertainties that could cause future results to differ materially from expected
results. Such statements are based on management's beliefs and assumptions made
on information currently available to it. The Company is under no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.

11
<PAGE> 12

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 2. CHANGES IN SECURITIES

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

Exhibit 27.--Financial Data Schedule for nine months ended September 30,
1998 (filed herewith.)

(B) REPORTS ON FORM 8-K

None

12
<PAGE> 13

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

WEIRTON STEEL CORPORATION
Registrant

By /s/ MARK E. KAPLAN

------------------------------------
Mark E. Kaplan
Controller (Principal Accounting
Officer)

November 16, 1998

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